Has your condominium unit been described as non-warrantable? That sounds bad, right? So what does it mean?
Basically a non-warrantable condo is a unit in a condominium project that is currently unable to be financed with a conventional or government-backed loan that could eventually be sold up to Freddie Mac or Fannie Mae. That excludes the vast majority of capital out there for mortgage lending.
In the Austin area, there are two main reasons that a condo project would be considered non-warrantable: percent sold and owner occupancy. The percent sold issue is just that: if there is an apartment or other type property that is legally converted to individually deeded condo units, then the non-warrantable standard requires that a certain percentage (over half) be sold or under contract and legally obligated to close.
Owner occupancy is the other standard that affects the most condo units in the Austin area. If the percentage of owner-occupied units in the project falls below half, the unit can't be leveraged with funds eventually intended for sale on the secondary market.
So what does this mean for property owner who wants to sell this year? OR the buyer who wants to purchase the unit? Well, it's tough out there. But the key to unlocking this conundrum lies in private, mostly local lenders who will lend on such a property. There are some caveats - - - a 720 FICO score is usually necessary and we're talking more like 10-11% down vs. FHA's relatively cheap 3.5%, but it can be done.
Do you have questions about condo buying in the Austin market? Call me, let's talk! 736-3353